Nikkei inches down after briefly rising past 11,000

Sun Jan 27, 2013 8:42pm EST

* Sony jumps on Citigroup upgrade
    * Nintendo leaps in catch-up with rally, but gains may be
limited
    * Advantest sags on report of disappointing earnings

    By Sophie Knight
    TOKYO, Jan 28 (Reuters) - Japan's Nikkei share average
breached the 11,000-point level at Monday's open to a fresh
32-month high after the yen dropped sharply over the weekend,
but it pulled back to be down by mid-morning as investors
awaited local earnings for further cues.
    The benchmark edged down 0.3 percent to 10,890.04 after
striking 11,002.86 on bumper foreign orders after the yen
dropped to 91 versus the dollar on Friday, spurring interest in
Japanese exporters whose overseas revenues are set to expand
once repatriated. 
    Among those seeing fat gains was Sony Corp, which
jumped 5.9 percent after Citigroup raised its rating to "buy"
from "neutral", saying the softer yen has enabled Sony to take
more risks on operations such as the home appliance business.
    "The potent mix of 'Abenomics' and strong risk appetite
abroad is continuing to soften the yen, which means investors
are still buying stocks," said Masayuki Doshida, senior market
analyst at Rakuten Securities. 
    A positive earnings season in the United States, where 68
percent of the 147 S&P companies that have reported earnings so
far have beaten expectations - above the 62 average since 1994 -
was helping to bolster sentiment, Doshida said. 
    "However, it may be difficult for investors to move before
they see how much the weaker yen will improve Japanese
companies' performance," Doshida said. "The benchmark faces
resistance around the 11,000 level." 
    With Japan's earnings season getting into full swing this
week, investors are hoping that the yen's more than 10 percent
fall against the dollar in the past two months will improve
Japanese companies' forecasts in the year to come.
    But the yen effect may not be enough to offset slowing
demand in China, exacerbated by a diplomatic spat that chilled
interest in Japanese products, as well as an ongoing EU debt
crisis that has severely crimped consumption in the region.
    Industrial robots maker Fanuc Ltd, which fell 4.9
percent on Monday morning, cited both of those reasons when it
cut its operating forecast for the year ending March by almost
20 percent to 178 billion yen ($2 billion) after the bell on
Friday. 
    Fanuc also said its operating profit for the nine months
ended December had dropped 13.4 percent from the previous year,
hurt by a yen that remained strong for much of that year,
although it changed its exchange rate assumption to 85 yen to
the dollar from a previous forecast of 78. 
    "We've got big tests in the coming week like Fanuc coming
out with weak numbers, and I don't think the judgment is over on
that yet. Four percent down is not a shock," said Stefan
Worrall, director of equity cash sales at Credit Suisse.
   "It does matter if euphoria has got ahead of itself. A lot of
these stocks have already ripped on a pretty bullish macro
outlook," Worrall added.
    Advantest Corp shed 5 percent after the Nikkei
business daily said the chipmaker's operating profit for the
year ending March was expected to undershoot expectations as it
likely suffered an operating loss of 2 billion yen ($22 million)
in the last quarter due to slowing iPhone 5 sales.
    Some shares, however, are starting to see gains after being
left behind in a rally that began in mid-November, when
then-incoming leader Shinzo Abe began calling for a weaker yen
and aggressive monetary easing to reinvigorate the Japanese
economy.
    A case in point is Nintendo Co Ltd which leapt 5.5
percent on Monday morning, but the stock is still 10.5 percent
below its level in mid-November, while the Nikkei has gained 25
percent and logged 11 straight weekly gains since then.
    "If the yen goes from 100 yen to the euro to 122 yen and the
dollar from 75 to 90, then this thing must move. This thing
hasn't moved at all. People are just playing the FX at the
moment. It is a catch-up," a trader who declined to be named
said. 
    "I would expect people taking profit very soon," he said,
adding that the move would be over on Tuesday as the
fundamentals of the company had not changed. 
    The broader Topix was flat at 917.20 by mid-morning.
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